Appeal details
Counselvise Citation
75321714 RSA 2014
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 4 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-08-2015
Appeal Filed By
Department
Bench Allotted
B
Next Hearing Date
18-08-2015
Assessment Year
2007-2008
Appeal Filed On
27-03-2014
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' # , $ %& BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NO. 753/MDS/2014 / ASSESSMENT YEAR : 2007-08 !!'#$ %&'(#)*+,$ %'-.../01 *234 APPELLANT) V. M/S. DAZZLE DESIGNER TILES P. LTD., 69, 2 ND MAIN ROAD, AMBATTUR INDUSTRIAL ESTATE, CHENNAI 600 056. PAN AABCD5272H *56234 RESPONDENT) 23 7 8 / APPELLANT BY : DR. B. NISCHAL, JCIT 5623 7 8 / RESPONDENT BY : SHRI A.S.SRIRAMAN, ADVOCATE : ; 7 <=> / DATE OF HEARING : 18.08.2015 ?@ 7 <=> / DATE OF PRONOUNCEMENT : 21.08.2015 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 24 .12.2013. - - ITA 753/14 2 2. THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS W ITH REGARD TO DELETION OF ADDITION OF ` 29,69,00/- MADE U/S.2(22)(E) OF THE I.T. ACT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS RECEIVED A LOAN OF ` 29,69,000/- FROM M/S. PUGAZH CHEMICAL PLANT AND EQUIPMENT PVT. LTD. ACCORDING TO THE ASSESSING OFF ICER, THE SHAREHOLDING OF THE ASSESSEE COMPANY IS A CONCERN I N WHICH THE SHAREHOLDERS OF M/S. PUGAZH CHEMICAL PLANT AND EQUI PMENT PVT. LTD. HAVE SUBSTANTIAL INTEREST, BEING SO, THE PROVI SIONS OF SEC.2(22)(E) OF THE ACT IS APPLICABLE. HOWEVER, TH E COMMISSIONER OF INCOME-TAX(APPEALS) OBSERVED THAT T HE ASSESSEE RECEIVED LOAN FROM M/S. PUGAZH CHEMICAL P LANT AND EQUIPMENT PVT. LTD. COULD NOT BE CONSIDERED AS DEEM ED DIVIDEND IN THE HANDS OF THE ASSESSEE, AS THE ASSE SSEE ITSELF IS NOT A SHAREHOLDER OF M/S. PUGAZH CHEMICAL PLANT AND EQUIPMENT PVT. LTD. AND FOLLOWING THE ORDER OF THE TRIBUNAL I N ASSESSEES OWN CASE IN ITA NO.818/MDS/2013 DATED 6.9.2013, ALL OWED THE APPEAL OF THE ASSESSEE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. - - ITA 753/14 3 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. WE FIND THAT SIMILAR ISSUE WAS CONSIDER ED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.818/MDS/2 013 DATED 6.9.2013 AND DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE BY OBSERVING AS FOLLOWS: 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. NO DOUBT, LD. CIT(APPEALS) WAS JUSTIF IED IN COMING TO A FINDING THAT ASSESSEE COULD NOT SHOW TH E COMMERCIAL NATURE OF THE TRANSACTIONS ENTERED BY IT WITH THE LENDER COMPANY, M/S PUGAZH CHEMICAL PLANT & EQUIPME NTS (P) LTD.. EXCEPT FOR A LETTER DATED 19 TH NOVEMBER, 2012 FILED BEFORE THE CIT(APPEALS), THERE IS NOTHING TO SUBSTA NTIATE THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT GIVEN BY M/S PUGAZH CHEMICAL PLANT & EQUIPMENTS (P) LTD. WAS A DEPOSIT FOR DEALERSHIP. THIS LETTER AT THE BEST WA S ONLY A SELF-EFFECTUATING DOCUMENT. THERE IS NOTHING ON RE CORD TO SHOW THAT ASSESSEE HAD DIVERSIFIED ITS BUSINESS INT O IMPORTED GLAZED TILES NOR ANYTHING TO SHOW THAT IT HAD APPOINTED M/S PUGAZH CHEMICAL PLANT & EQUIPMENTS (P ) LTD. AS A DEALER. ASSESSEE HAS ALSO NOT BROUGHT ON RECORD AS TO WHETHER ANY SIMILAR DEPOSITS WERE RECEIVED FR OM OTHER DEALERS FOR SAME PURPOSE. THE AMOUNT RECEIVED BY T HE ASSESSEE WAS ` 1,44,38,000/- FROM M/S PUGAZH CHEMICAL PLANT & EQUIPMENTS (P) LTD., OUT OF WHICH, ` 76,68,000/- WAS REPAID. HAD IT BEEN DEPOSIT OF TRADING NATURE, AS REITERATED - - ITA 753/14 4 BY THE ASSESSEE, THERE WOULD NOT HAVE BEEN ANY REPA YMENT. BUT, AT THE SAME TIME, IT IS AN ADMITTED POSITION T HAT ASSESSEE-COMPANY AS SUCH WAS NOT A SHAREHOLDER OF T HE LENDER COMPANY. MAY BE THERE WERE INDIVIDUAL SHAREHOLDERS, WHO HAD SHARES OF BOTH THE COMPANIES, HOLDING IN EXCESS OF 10% IN SUCH COMPANIES. HOWEVE R, TO ROPE IN A LOAN/ADVANCE AS DEEMED DIVIDEND UNDER SEC TION 2(22)(E) OF THE ACT, IT IS NECESSARY THAT THE BENEF IT SHOULD HAVE BEEN RECEIVED BY THE SHAREHOLDERS. THE SPECIA L BENCH OF THIS TRIBUNAL IN THE CASE OF BHAUMIK COLOU R PVT. LTD. (SUPRA) HAS CLEARLY HELD AT PARAS 39 AND 40 OF ITS ORDER THAT DEEMED DIVIDEND COULD BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO WAS A SHAREHOLDER OF THE LENDER COM PANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHARE HOLDER. IT WAS HELD BY THE TRIBUNAL AT PARAS 39 AND 40 OF I TS ORDER AS UNDER:- 39. IN THE DECISION OF THE TRIBUNAL IN THE CASE OF NIKKO TECHNOLOGIES (I) (P) LTD. (SUPRA), RELIANCE HAS BEE N PLACED ON CIRCULAR NO.495 DATED 22 ND SEPTEMBER, 1987 WHICH STATES AS FOLLOWS:- FURTHER DEEMED DIVIDEND WOULD BE TAXABLE IN THE H ANDS OF THE CONCERN, WHERE ALL THE FOLLOWING CONDITIONS ARE SATISFIED.. WE ARE OF THE VIEW THAT CIRCULARS OF CBDT TO THE E XTENT THAT THEY DO NOT TONE DOWN THE RIGOR OF THE PROVISI ONS OF THE ACT IN THE SENSE TO THE EXTENT THEY ARE NOT BENEVOL ENT ARE NOT BINDING. - - ITA 753/14 5 40. APART FROM THE ABOVE, IT IS ALSO NOTICED THAT S . 2(22)(E)(III) PROVIDES TO A SHAREHOLDER AS FOLLOWS: DIVIDEND DOES NOT INCLUDE: (I) TO (II). (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PR EVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEA NING OF SUB- CL. (E) TO THE EXTENT TO WHICH IT IS SO SET OFF. IN THE EVENT OF THE PAYMENT OF LOAN OR ADVANCE BY A COMPANY TO A CONCERN BEING TREATED AS DIVIDEND AND TAXED IN THE HANDS OF THE CONCERN THEN THE BENEFIT OF SET OF F CANNOT BE ALLOWED TO THE CONCERN, BECAUSE THE CONCERN CAN NEVER RECEIVE DIVIDEND FROM THE COMPANY WHICH IS ONLY PAI D TO THE SHAREHOLDER, WHO HAS SUBSTANTIAL INTEREST IN THE CO NCERN. THE ABOVE PROVISIONS ALSO THEREFORE CONTEMPLATE DEEMED DIVIDEND BEING TAXED IN THE HANDS OF A SHAREHOLDER ONLY. FO R THE REASONS STATED ABOVE, WE ARE OF THE VIEW THAT THE L AW LAID DOWN IN THE CASE OF NIKKO TECHNOLOGIES (I) (P) LTD. (SUPRA) IS NOT CORRECT. WE THEREFORE HOLD THAT DEEMED DIVIDEN D UNDER S. 2(22)(E) OF THE I.T. ACT, 1961 CAN BE ASSESSED ONLY IN THE HANDS OF A SHAREHOLDER OF THE LENDER COMPANY AND NO T IN THE HANDS OF ANY OTHER PERSON. THE VIEW TAKEN BY THE SPECIAL BENCH HAS BEEN CONFIRMED BY HON'BLE DELHI HIGH COURT IN THE CASE O F ANKITECH PRIVATE LIMITED & OTHERS (SUPRA) AS WELL A S IN THE CASE OF GOPAL CLOTHING CO. (P) LTD. (SUPRA). N O DOUBT, IN THE CASE OF SADHANA TEXTILES MILLS (P.) L TD. (SUPRA), RELIED ON BY THE LEARNED D.R., HON'BLE BOM BAY HIGH COURT HAD HELD THAT SECTION 2(22)(E) COULD BE APPLIED EVEN ON AN ADVANCE OR LOAN PAID TO A CORPOR ATE - - ITA 753/14 6 ENTITY. HOWEVER, IN THE SAID CASE, THE ASSESSEE- COMPANY ITSELF WAS HOLDING EQUITY SHARES IN THE LEN DER COMPANY, EXCEEDING 10%. HERE, ON THE OTHER HAND, ADMITTEDLY THE ASSESSEE-COMPANY WAS NOT HOLDING ANY SHARES IN THE LENDER COMPANY AT ALL. THEREFORE, IN OUR OPINION, THE SAID DECISION WILL NOT HELP THE CASE O F THE REVENUE. WE ARE OF THE OPINION THAT THE ISSUE IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION OF THE TR IBUNAL IN ASSESSEES OWN CASE. THEREFORE, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS ). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON FRIDAY, THE 2 1 ST OF AUGUST, 2015 AT CHENNAI. SD/- SD/- ( AB CDE 5F ) ( A E G H= ) *%IIJK)#L#M), *%)#LN# ', D FO /JUDICIAL MEMBER > FO4PQRS# AD
; /CHENNAI, TF /DATED, THE 21 ST AUGUST, 2015. MPO* FU 7 5
